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The Price of Processing: Information Frictions and Market Efficiency in DeFi
This paper investigates the speed of price discovery when information becomes publicly available but requires costly processing to become common knowledge. We exploit the unique institutional setting of hacks on decentralized finance (DeFi) protocols. Public blockchain data provides the precise time a hack’s transactions are recorded—becoming public information—while subsequent social media disclosures mark the transition to common knowledge. This empirical design allows us to isolate the price impact occurring during the interval characterized by information asymmetry driven purely by ...
Report
Stablecoins Meet the Mundell–Fleming Trilemma
We study how stablecoins impact global capital flows by constructing a novel wallet-level dataset linking geotagged Ethereum Name Service registrations to stablecoin transactions around banking restrictions, currency crises, sanctions, and monetary disruptions. We find that crisis-country wallets experience significant increases in USD stablecoin inflows and receipt activity during crisis weeks. Motivated by this evidence, we develop a small-open-economy New Keynesian model in which household adoption of programmable stablecoins weakens the government’s enforcement technology for capital ...